Acushnet Holdings’ Q3 Sales Expand 12.6 Percent

Acushnet Holdings reported a significant hike in earnings in the third quarter as sales grew 12.6 percent.

Third Quarter and Year-to-Date 2019 Financial Results

• Third quarter net sales of $417.2 million, up 12.6 percent year over year, up 13.8 percent in constant currency
• Year-to-date net sales of $1,313.1 million, up 1.8 percent year over year, up 3.9 percent in constant currency
• Third quarter net income attributable to Acushnet Holdings Corp. of $29.8 million, up 319.7 percent year over year
• Year-to-date net income attributable to Acushnet Holdings Corp. of $103.2 million, up 16.6 percent year over year
• Third quarter Adjusted EBITDA of $55.8 million, up 45.7 percent year over year
• Year-to-date Adjusted EBITDA of $195.6 million, up 0.4 percent year over year

“Acushnet’s momentum continued in the third quarter, where our growth was fueled by gains in each of our business  segments and across all major regions,” said David Maher, Acushnet’s president and chief executive officer. “Our results through the first three quarters of 2019 were led by new Pro V1 and Pro V1x golf balls, our recently launched Titleist T-Series irons and healthy gains in Titleist gear and FootJoy golf wear. Our year-to-date performance affirms our commitment to provide dedicated golfers with great products and value-added services that help them play their best golf.

“I must acknowledge the good work of our supportive trade partners and thank my fellow associates who are successfully executing our long-term strategies. Our product development teams are doing a great job of bringing innovative and exciting new products to market and effectively meeting the performance and design needs of dedicated golfers,” Maher continued. “We look forward to building upon our market momentum, delivering a strong close to the year and setting the stage for continued success in 2020.”

Consolidated net sales for the quarter increased by 12.6 percent. On a constant currency basis, consolidated net sales were up 13.8 percent resulting from an increase of $28.4 million in net sales of Titleist golf clubs primarily related to higher sales volumes associated with the launches of our irons, hybrids and putters during the quarter, as well as an increase of $4.5 million in net sales of Titleist golf gear and an increase $3.5 million in FootJoy golf wear. The remaining change in net sales was primarily due to sales from KJUS, acquired in the third quarter of 2019, which are not allocated to one of our four reportable segments.

On a geographic basis, consolidated net sales in the United States increased by 6.2 percent in the quarter, driven by an increase of $4.3 million in net sales of Titleist golf clubs driven by the launches of our irons, putters and hybrids, and an increase of $3.3 million in net sales of Titleist golf balls primarily driven by sales from PG Golf, which we acquired in the fourth quarter of 2018 and an increase of $2.7 million in net sales of Titleist golf gear.

Net sales in regions outside the United States were up 20.5 percent and up 23.2 percent on a constant currency basis. On a constant currency basis, EMEA was up 39.3 percent, Japan was up 27.6 percent, and Korea was up 18.4 percent. In EMEA, the increase in net sales was primarily due to sales from KJUS and higher sales volumes of Titleist golf clubs. In Japan and Korea, the increase in net sales was primarily due to increases in sales of Titleist golf clubs, FootJoy golf wear and Titleist gear.

Segment specifics:

• 0.7 percent decrease in net sales (0.4 percent increase on a constant currency basis) of Titleist golf balls. The increase in constant currency was primarily driven by sales from PG Golf which we acquired in the fourth quarter of 2018, higher sales volumes of our latest generation Pro V1 and Pro V1x golf balls, partially offset by sales volume declines in our AVX models and our performance golf balls which were in their second model year.
• 28.1 percent increase in net sales (28.7 percent increase on a constant currency basis) of Titleist golf clubs. This increase primarily resulted from higher sales volumes of our newly launched TSeries irons, TS hybrids and putters and higher average selling prices. The increase was partially offset by lower sales volumes of drivers and fairways.
• 13.4 percent increase in net sales (14.8 percent increase on a constant currency basis) of Titleist golf gear. This increase was due to sales volume increases across all categories of the gear business.
• 2.4 percent increase in net sales (3.5 percent increase on a constant currency basis) in FootJoy golf wear primarily as a result of higher sales volumes in the apparel and footwear categories.

Net income attributable to Acushnet improved by $22.7 million to $29.8 million, up 319.7 percent year over year, primarily as a result of an increase in income from operations and a decrease in income tax expense.

Adjusted EBITDA was $55.8 million, up 45.7 percent year over year. Adjusted EBITDA margin was 13.4 percent for the third quarter versus 10.4 percent for the prior year period.

Summary of First Nine Months 2019 Financial Results

Consolidated net sales for the first nine months increased by 1.8 percent. On a constant currency basis, consolidated net sales were up 3.9 percent due to an increase of $25.2 million in Titleist golf balls driven by our latest generation Pro V1 and Pro V1x golf balls and sales from PG Golf which we acquired in the fourth quarter of 2018, an increase of $9.0 million in Titleist golf gear on sales increases across all segments, an increase of $5.6 million in FootJoy golf wear primarily due to sales volume increases in apparel, partially offset by a decrease of $3.5 million in Titleist golf clubs. The remaining change in net sales was primarily due to sales from KJUS, acquired in the third quarter of 2019, which are not allocated to one of our four reportable segments.

On a geographic basis, consolidated net sales in the United States increased by 4.0 percent in the nine-month period. The increase in net sales in the United States resulted from an increase of $16.7 million in net sales of Titleist golf balls primarily driven by higher sales volumes of our latest generation Pro V1 and Pro V1x golf balls launched in the first quarter of 2019, sales from PG Golf which we acquired in the fourth quarter of 2018 and an increase of $6.4 million in net sales of FootJoy golf wear, partially offset by a decrease of $3.5 million in Titleist golf clubs.

Net sales in regions outside the United States were down 0.7 percent and up 3.8 percent on a constant currency basis. On a constant currency basis, EMEA was up 9.3 percent, Korea was up 6.9 percent and Japan was down 3.5 percent. In EMEA, the increase in net sales was primarily due to sales from KJUS and higher sales volumes of Titleist golf balls. In Korea, the increase in net sales was primarily driven by increased sales in Titleist gear and Titleist golf balls. In Japan, the decrease in net sales was primarily due to a decrease in sales of FootJoy golf wear.

Segment specifics:

• 4.1 percent increase in net sales (6.0 percent increase on a constant currency basis) of Titleist golf balls primarily driven by higher sales volumes of our latest generation Pro V1 and Pro V1x golf balls launched in the first quarter of 2019, and sales from PG Golf which we acquired in the fourth quarter of 2018, partially offset by a sales volume decline in our performance golf balls which were in their second model year.
• 2.6 percent decrease in net sales (1.0 percent decrease on a constant currency basis) of Titleist golf clubs. Sales volumes of our newly launched T-Series irons, TS hybrids and putters, and TS drivers were offset by lower sales volumes of our wedges and prior generation irons, which were both in their second model year.
• 4.9 percent increase in net sales (7.5 percent increase on a constant currency basis) of Titleist golf gear. This increase was primarily due to sales increases across all categories of the gear business.
• 0.8 percent decrease in net sales (1.6 percent increase on a constant currency basis) in FootJoy golf wear.

The increase in constant currency was primarily driven by a sales volume increase and higher average selling prices in apparel, partially offset by lower sales in the footwear category due to lower average selling prices.

Net income attributable to Acushnet increased by $14.7 million to $103.2 million, up 16.6 percent year over year, primarily as a result of an increase in income from operations and a decrease in income tax expense.

Adjusted EBITDA was $195.6 million, up 0.4 percent year over year. Adjusted EBITDA margin was 14.9 percent for the first nine months versus 15.1 percent for the prior year period.

2019 Outlook

• Consolidated net sales are expected to be approximately $1,660 to 1,680 million.
• Consolidated net sales on a constant currency basis are expected to be in the range of up
  3.1 percent to 4.4 percent.
• Adjusted EBITDA is expected to be approximately $237 to 243 million

Under its previous guidance, the outlook called for:

• Consolidated net sales are expected to be approximately $1,655 to 1,685 million.
• Consolidated net sales on a constant currency basis are expected to be in the range of up
  2.8 percent to 4.7 percent.
• Adjusted EBITDA is expected to be approximately $235 to 245 million.